CHINA Light & Power Co plans to introduce a tariff rise close to the inflation rate next year - a greater increase than in past years. Chairman Sir Sidney Gordon said the move was aimed at covering increases in operating costs. 'We hope that [the rate of increase] would be around inflation,' he said, declining to give a firm figure. Over the last 10 years, tariffs rose 12 per cent while the consumer price index went up more than 100 per cent. Sir Sidney attributed the low increase rate in the past decade partly to the group's opportune switch from oil firing to coal firing, and partly to the better than expected rises in electricity sales to China. In accordance with its agreement with Hong Kong Government, 80 per cent of the benefits from those sales has been passed on directly to the consumer. 'However, the time has now been reached when tariffs will have to rise more rapidly than experienced in the past. These rises coincide with our commitment to invest in a new plant at Black Point Power Station to meet forecasted demands,' he said. The plan for a rate increase was stated in a financing plan submitted to the Government in 1992. The increases would apply to all categories of electricity use, including commercial, manufacturing, domestic and government. 'The company is making, and will continue to make, every effort to keep down costs,' he said. The cost reduction programme would include a remuneration review to align the basis of staff's salary payment to the local market. Its existing pay scale makes reference to the expatriate market as expatriates used to make up the majority of the company's workforce. Sir Sidney said the adjustment would be desirable as now about two-thirds of staff members were locals. The group expects the territory's electricity demand to grow five per cent annually for the next 10 years. Meanwhile, he said the group would be interested in a stake in the second phase of the Daya Bay nuclear station but has not been made an offer. 'It seems logical that as we were involved in Daya Bay phase one we should also be involved in Daya Bay phase two,' he said. But he noted the group could not take more power in Hong Kong, suggesting it would not buy electricity from Daya Bay phase two if it had a stake in it. It buys electricity from Daya Bay phase one. The group was also looking at investment opportunities in Guangdong province, he said. 'We have possible new ventures in mind,' he said, adding they were mostly generation joint ventures. 'China now wants to take the leading part, or more than 50 per cent. So we will be a minority shareholder [in any China project],' he said. In Shandong province, negotiations on its proposed joint venture power station project - which had been going on for two years - were coming close to conclusion. 'We will know early next year whether it will go ahead,' said Sir Sidney. 'We have cleared most of the details with Shandong authorities. We are now waiting for Beijing.' He said, however, that the high inflation rate in China could be the reason for the slowdown in approvals for new power projects in China. Chinese officials desperate to clamp down on inflation tended to be discreet in approving new power ventures which inevitably would charge higher tariffs than existing ones to pull up inflation. 'Everything in China has been very slow. We have had few power deals approved in past years,' he said. The Shandong project would not be subject to a scheme of control like the one in Hong Kong aimed at holding the balance between the consumers and shareholders. While foreign investors have reported that caps of between 12 and 15 per cent have been set privately by the central government, he said the group was not interested in any project offering a 12 per cent investment return.